Union Budget 2010: How it affects your Budget?

In any Union Budget there are two things which concerns common man like us – The first being the Personal Income Tax Rates and the second “what has become cheaper and what’s expensive” post budget.

I am sure if you had browsed through any of the Indian newspaper or followed any news channels in last two days you would have almost by hearted the “What’s cheaper, what’s costlier” list and the revised tax slabs.

In this post I have focused on the common man’s second most important point – How budget 2010 affects your household budget : The Good, The Bad & The Ugly!

Let’s start with the good news first:

Here is the list of goods and services which have become cheaper with Budget 2010

Medical equipments:

Reason: A concessional basic duty of 5% is being prescribed on parts and accessories for the manufacture of such equipment while they would be exempt from CVD and special additional duty.

Impact: Lower Medical Bills? I doubt but may be if some of the benefit is passed on to end users by hospitals and doctors.

Microwave oven:

Reason: Reduction in customs duty on one of its key components, namely magnetrons from 10% to 5%.

Impact: More Healthy and Tasty food in Indian Kitchens along with greater convenience to Homemakers

Mobile phones:

Reason: To encourage the domestic manufacture of accessories, duty exemptions are now being extended to parts of battery chargers and hands-free headphones. Also, the validity of the exemption from special additional duty is being extended till March 31, 2011.

Impact: You can flash the new mobile phone and with the call charges on ever decreasing trend probably you would anyway need to purchase more phones.

Watches:

Reason: FM has proposed to provide an outright 4% exemption from special additional duty to goods imported in a pre-packaged form for retail sale.

Impact: Young India Fashionable India!

Refrigerators:

Reason: Full exemption from customs duty to refrigeration units required for the manufacture of refrigerated vans or trucks has been proposed.

Impact: Less wastage due to more Refrigerators units. Seems now you can have frozen foods, ice creams in far flung areas too

LED lights:

Reason: Central Excise duty on LED lights reduced from 8% to 4%, at par with Compact Fluorescent Lamps.

Impact: More LED lights less Electricity consumption

Toys:

Reason: FM has proposed to fully exempt them from Central Excise duty.

Impact: Smiling Babies and Happy Mothers!

Long pepper and Asafoetida:

Reason: Basic customs duty on long pepper reduced from 70% to 30% and on Asafoetida from 30% to 20%

Impact: Ummm more spicy food in your kitchen

Digital Cable Transmission/ Set top boxes:

Reason: FM has proposed project import status to Digital Head End equipment at a concessional customs duty of 5% with full exemption from special additional duty to the initial setting up of such projects.

Impact: Get that cable connection now and spare yourself from DD

Electric vehicle:

Reason: The duty on critical components required to manufacture electric vehicles has been reduced to 4%. The finished vehicles also will suffer only 4% duty.

Impact: Major automakers like Maruti Suzuki, Volvo and Hyundai have announced a price hike of Rs 6,000 to Rs 25,000. Hmm should have purchased my car this year itself.

Jewellery:

Reason: The FM has raised the duty on imports of gold and platinum to Rs 300 per 10 grams from Rs 200.

Impact: Wear watches but say no to expensive Jewellery

Tobacco:

Reason: FM proposes excise duty on all non-smoking tobacco such as scented tobacco, snuff, chewing tobacco etc. In addition, he introduces a compounded levy scheme for chewing tobacco and branded unmanufactured tobacco based on the capacity of pouch packing machines.

Impact: Less of passive smoking for all of us and one more reason for people to quit smoking.

Air travel:

Reason: All classes of air travel to pay service tax.

Impact: Want cheaper Holidays? Take the good old Indian Railways

Air Conditioner, TV:

Reason: Partial roll back rate reduction in central excise duties and enhance the standard rate on all non-petroleum products from 8 per cent to 10% ad valorem.

Impact: Compensated for cheaper set top boxes!

Cement:

Reason: The specific rates of duty applicable to portland cement and cement clinker are also being adjusted upwards.

Impact: Costlier Homes! Unaffordable becomes even more unaffordable

Under Construction Homes:

Reason: Brought in Service Tax ambit

Impact: Costlier Homes! Unaffordable becomes even more unaffordable

The bad is over but the ugly is still there!

Petroleum Products:

Reason: Customs duty on crude oil to 5%, on diesel and petrol to 7.5% and on refined other products to 10%. Re 1 hike in excise duty on petrol, diesel.

Impact: By the time you are reading this, the petrol prices have been up by Rs.2.71/liter and diesel by Rs.2.55/liter. Learn to use Public Transport

Cost of most goods will go up:

Reason: The basic excise duty has been increased from 8% to 10%.

Impact: This will have a compounding effect on almost all goods. Almost all commodities like steel, copper, plastics, etc are going to cost more.

The above two factors i.e. increase in petrol/diesel prices and hike in excise duty will have a cascading effect on almost all the goods. This would increase the prices of almost all the products leading to even higher Inflation. This for sure is going to up your overall expenses for next year.

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Disclaimer

The website is not affiliated to any company, agent or brokers for selling/ recommending investments. All the information in the blog is for educational and informational purpose only. Please consult a qualified financial planner and do your own due diligence before making any investment decision.